The owner of two Livingtson-based investment companies will repay nearly $1 million after being accused of defrauding elderly clients and using the money for his mortgage and other personal expenses.
The settlement agreement involving Eisenstark Advisory Inc. and J.N.J. Capital Management Inc., owned by Livingston resident Jacob Eisenstark, was announced by New Jersey Attorney General Jeffrey Chiesa and the state’s Division of Consumer Affairs.
As part of the Bureau of Securities settlement, Eisenstark, is ordered to pay $940,000 - $850,000 in consumer restitution and a $90,000 civil monetary penalty. The firms are also permanently barred from the securities industry in New Jersey.
The settlements came about after Eisenstark, and his wife Blanche admitted to defrauding investors out of $850,000 by diverting invested funds for his family’s personal expenses, and making unsuitable investments.
"Jacob Eisenstark convinced victims, including senior citizens, to part with their hard-earned savings, with the false promise of a 15 percent rate of return – only to then misuse their money to pay mortgages and other personal expenses," said Chiesa in a statement.
"Fraud schemes like this leave victims with pain and heartache and little else. Through this action, we've shut down the defendant's operation and taken a significant step toward providing restitution to victims."
Eisenstark was a registered investment adviser representative and principal of Eisenstark Advisory, an investment adviser firm previously registered with the Bureau of Securities. Blanche was the secretary for J.N.J. Capital Management, a company controlled by her husband.
Eisenstark admitted that he used invested funds for the family’s personal expenses, including mortgage payments on residential properties in Livingston and in Palm Harbor, Florida, and fees for a residence purchased by the Eisenstarks’ daughters in West Orange.
As part of the settlement, Eisenstark admitted that he misled some investors by leading them to believe he managed a fund that had at least $15 million in assets and that the investors would earn a 15 percent annual return by investing in the fund.
He further misled some investors by giving them monthly “interest distribution payments” that they believed were from the interest earned by their investments. Nearly all of those “interest distributions” were fictitious, because most were taken from the investors’ own principal payments.
"As a result of our lawsuit, this defendant is stopped from using deceit and lies to line his pockets with investors' money,” said Eric Kanefsky, Acting Director of the New Jersey Division of Consumer Affairs. “Our Bureau of Securities remains vigilant in investigating financial fraud and protecting the hard-earned assets of investors."